Finance Minister Natalie Jaresko reached an accord with a Franklin Templeton-led creditor committee that includes a 20% writedown to the face value of about $18 billion of eurobonds, the first of which matures in less than a month. The agreement also pushes back redemption dates by four years and sets interest at 7.75% on all maturities, according to an e-mailed statement from the Finance Ministry. Russia is being offered the same terms as private bondholders, Bloomberg has reported.
Bonds surged the most on record.
"It’s been a very difficult five months," said Jaresko, a Chicago native who was given Ukrainian citizenship when Poroshenko appointed her finance minister last December. "I’m confident that the markets will receive this quite well,” she said in an interview on Wednesday.
Poroshenko is seeking to meet the conditions of emergency assistance from the International Monetary Fund, which says debt restructuring should save Ukraine $15.3 billion through 2018, while trying to end the worst recession anywhere in Europe, the Middle East or Africa. The economy of the largest country inside Europe by area is poised to contract 8.7% this year, forecasts compiled by Bloomberg show.
As UNIAN reported earlier, Ukraine has been conducting negotiations with the creditors on sovereign debt restructuring since March 2015, discussing extension of maturities and write-off of part of the debt's nominal value. The measures aim at saving $5.2 billion in debt repayment in 2015 and up to $15.3 billion in the next four years.
After several months of negotiations, state-run Ukreximbank and Oschadbank have recently agreed with holders of their 2015-2018 loan participation notes worth $1.5 billion and $1.3 billion, respectively, on the re-profiling of the debts. Principal debt repayment was postponed by seven years in exchange to an increase in coupon rates without writing off principal debt.
In June, Ukrainian Finance Minister Natalie Jaresko stated that if there were no progress in talks with the creditors, Ukraine would "theoretically" be in a position to declare a moratorium on sovereign debt repayment in late July, with such right being provided by a law, which came in force on June 17.
Later, Ukrainian officials and the ad hoc creditors' committee issued a joint statement reporting significant progress made in the negotiations and reaching confidentiality arrangements.
On July 24, the Ukrainian Finance Ministry effected $120 million interest payment that came due on that day.
On August 4, Finance Ministry sent a revised proposal on the sovereign and sovereign guaranteed debt to the ad hoc creditors` committee calling them to participate in a high-level meeting in London on August 6. However, the creditors who had previously agreed to write off 5% of the face value of Ukraine's sovereign debt asked to put off the meeting until August 10-11.
On August 12, Ukraine and the ad hoc creditors' committee failed to reach an agreement regarding the restructuring of $19 billion in Ukraine's foreign debt, having scheduled another meeting.
Ukrainian Finance Minister Natalie Jaresko, who personally came to San Mateo, California, the United States, to meet with the creditors, described the current round of the negotiations as the "final opportunity to reach a full agreement."